Steepening YCRV

Bond prices have climbed back since last week, and this morning's negative economic data (existing home sales, consumer confidence) releases provided a bullish case as a safe haven. But sellers stepped in during the afternoon, erasing the day's gains. It seems that today's negative economic data gave support to Bernanke's rate cute decision, and made further rate cuts this year seem more likely. This only means that there will be more inflation created to sustain the housing problem, which is far from over. The market seems to be more concerned about inflation, downplaying bond's role as a safe haven. It will be interesting to see how long bonds react to this week's economic data releases (durable goods, GDP, new home sales etc.) which will most likely turn out to be negative.